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The Ramco Cements

BSE: 500260|NSE: RAMCOCEM|ISIN: INE331A01037|SECTOR: Cement - Major
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Notes to Accounts Year End : Mar '18

Trade and other receivables

The fair value is estimated as the present value of the future cash flows, discounted at the market rate of interest at the reporting date. However, the fair value generally approximates the carrying amount due to the short term nature of such assets.

Forward exchange contracts

The fair value of forward exchange contracts is based on the quoted price if available; otherwise it is estimated by discounting the difference between contractual forward price and current forward price for the residual maturity of the contract using government bond rates.

Non-derivative financial liabilities

The fair value of non-derivative financial liabilities viz, soft loan from government, deferred sales tax liability, borrowings are determined for disclosure purposes calculated based on the present value of future principal and interest cash flows, discounted at the market rate of interest at the reporting date.

Financial guarantee obligation

The fair value of financial guarantee obligation with reference to loan availed by subsidiary/associates is determined on the basis of estimated cost involved in securing equivalent size of the guarantees from bank.

Investment Properties

The fair value is determined for disclosure purposes based on an annual evaluation performed by an internal technical team measured using the technique of quoted prices for similar assets in the active markets and further moderated by market corroborated inputs.

1. Recent Accounting pronouncements - Standards issued but not effective

In March 2018, the Ministry of Corporate Affairs issued the Companies (Indian Accounting Standards) (Amendments) Rules, 2018, notifying deletion of existing standard Ind AS 18 and insertion of new standard Ind AS 115 on Revenue from Contracts with Customers. The amendments are applicable to the company from April 1, 2018.

This Standard establishes a five-step model to account for revenue arising from contracts with customers. Revenue is recognized at an amount that reflects the consideration to which an entity expects to be entitled in exchange for transferring goods or services to a customer.

Adoption of Ind AS 115 is not expected to have any impact on the Company’s revenue and profit or loss. The Company expects the revenue recognition to occur at a point in time when the materials are delivered at the customers in case of cement and cementations’ materials and in the case of wind power, when energy is transmitted to the grid.

However, the Company is evaluating the requirements of the amendment and the effect on the financial statements is being evaluated.

2. Significant Estimates and Judgments

The preparation of the financial statements requires management to make judgments, estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities and the accompanying disclosures, and the disclosure of contingent liabilities. Actual results could vary from these estimates. The estimates and underlying assumptions are reviewed on an on-going basis. Revisions to accounting estimates are recognized in the period in which the estimate is revised if the revision effects only that period or in the period of the revision or future periods, if the revision affects both current and future years.

Accordingly, the management has applied the following estimates / assumptions / judgments in preparation and presentation of financial statements:

Property, Plant and Equipment, Intangible Assets and Investment Properties

The residual values and estimated useful life of PPEs, Intangible Assets and Investment Properties are assessed by the technical team at each reporting date by taking into account the nature of asset, the estimated usage of the asset, the operating condition of the asset, past history of replacement and maintenance support. Upon review, the management accepts the assigned useful life and residual value for computation of depreciation/amortization. Also, management judgment is exercised for classifying the asset as investment properties or vice versa.

Current Taxes

Calculations of income taxes for the current period are done based on applicable tax laws and management’s judgment by evaluating positions taken in tax returns and interpretations of relevant provisions of law.

Deferred Tax Asset (Including MAT Credit Entitlement)

Significant management judgment is exercised by reviewing the deferred tax assets at each reporting date to determine the amount of deferred tax assets that can be retained / recognized, based upon the likely timing and the level of future taxable profits together with future tax planning strategies.

Contingent Liabilities

Management judgment is exercised for estimating the possible outflow of resources, if any, in respect of contingencies / claims / litigations against the Company as it is not possible to predict the outcome of pending matters with accuracy.

Impairment of Trade receivables

The impairment for trade receivables are done based on assumptions about risk of default and expected loss rates. The assumptions, selection of inputs for calculation of impairment are based on management judgment considering the past history, market conditions and forward looking estimates at the end of each reporting date.

Impairment of Non-financial assets (PPE/Intangible Assets/Investment Properties)

The impairment of non-financial assets is determined based on estimation of recoverable amount of such assets. The assumptions used in computing the recoverable amount are based on management judgment considering the timing of future cash flows, discount rates and the risks specific to the asset.

Mine Development

In determining the allocation of mine development cost based on the unit of production method, assumptions and estimates are made by the management, in relation to the estimated mineral reserves available for the remaining period.

Mines Restoration Expenditure

In determining the provision for Mines restoration expenditure, assumptions and estimates are made by the management, in relation to discount rates, the expected mineral reserves, estimated cost to restore the mines and the expected timing of those costs.

Defined Benefit Plans and Other long term benefits The cost of the defined benefit plan and other long term benefits, and the present value of such obligation are determined by the independent actuarial valuer. An actuarial valuation involves making various assumptions that may differ from actual developments in future. Management believes that the assumptions used by the actuary in determination of the discount rate, future salary increases, mortality rates and attrition rates are reasonable. Due to the complexities involved in the valuation and its long term nature, this obligation is highly sensitive to changes in these assumptions. All assumptions are reviewed at each reporting date.

Fair value measurement of financial instruments

When the fair values of financial assets and financial liabilities could not be measured based on quoted prices in active markets, management uses valuation techniques including the Discounted Cash Flow (DCF) model, to determine its fair value The inputs to these models are taken from observable markets where possible, but where this is not feasible, a degree of judgment is exercised in establishing fair values. Judgments include considerations of inputs such as liquidity risk, credit risk and volatility.

Interests in other entities

Significant management judgment is exercised in determining the interests in other entities. The management believes that wherever there is a significant influence over certain companies belonging to its group, such companies are treated as Associate companies even though it holds less than 20% of the voting rights.

(a) The Company has capitalized borrowing cost oft 3.31 Crores (PY: Nil) during the year. The Capitalization rate used to determine the amount of borrowing costs to be capitalized in the weighted average interest rate applicable to the entity’s general borrowings that are outstanding during the year, in this case 8.32% p.a.

(b) The carrying amount of movable fixed assets of the Company and immovable properties (excluding mining lands) pertaining to Cement plant located at Alathiyur, Ariyalur, Ramasamy Raja Nagar, Jayanthipuram, Mathodu, Chengalpattu, Salem have been pledged by way of pari passu first charge as security for Long term Borrowings (Refer Note 25).

(c) The Impairment loss relates to assets that were damaged/ discarded during the year. The written down value as at the date of damage /discard was recognized as impairment loss in the Statement of Profit and Loss and also derecognized from the financial statement since no future benefit is expected from its use / disposal.

(d) Deductions in Gross Block comprises of:

(a) The Company has accounted for investments in Subsidiary and Associates at Cost.

(b) The Company has recognized the fair value of transaction cost amounting to Rs, 1.12 Crores and Rs, 2.50 Crores on financial guarantees as part of Cost of Investment on initial recognition, for the financial guarantees given on behalf of Ramco Wind farms Limited and Ramco Systems Limited respectively.

(c) The carrying amount of investment in subsidiary / associates is tested for impairment in accordance with Ind AS 36. There is no impairment in the value of investments as at the reporting date.

(a) Capital Advances are secured by way of Bank guarantees.

(b) The Company’s petition filed against the judgment upholding the validity of “The Cess and Other Taxes on Minerals (Validation) Act, 1992” in the Supreme Court has been ruled in company’s favour. Pursuant to the above judgment, the Company is entitled to receive a sum ofRs, 1.50 Crores (PY:Rs, 1.50 Crores) from the Government of Tamil Nadu, which is included in ‘Balance / Claims with Government Departments’.

(c) Prepaid Expenses include Rs, 7.02 Crores (PY:Rs, 3.60 Crores) towards unAmortized upfront premium paid towards lease of land and out of which, Rs, 0.18 Crores (PY:Rs, 0.14 Crores) have been classified under Other current assets.

(b) Trade receivables are neither due from directors or other officers of the company either severally or jointly with any other person, nor any trade or other receivables are due from firms or private companies respectively in which any director is a partner, a director or a member.

(c) Trade receivables in respect of cement are generally non-interest bearing. However, for certain receivables of wind power, overdue interest is applicable in terms of specific agreement with counterparty (Refer Note 37[a]).

(d) The receivables from the related parties are furnished in Note 52[c1].

(e) Refer Note 54 for information about risk profile of Trade Receivables under Financial Risk Management.

(f) The total carrying amount of trade receivables has been pledged as security for Short term Borrowings.

Notes

(a) There are no repatriation restrictions with regard to cash and cash equivalents as at the end of the reporting period.

(b) Refer Note 54 for information about risk profile of cash and cash equivalents under Financial Risk Management.

(ii) Term/Rights/Restrictions attached to Equity Shares

The Company has one class of equity shares having a face value ofRs, 1/- each. Each shareholder is eligible for one vote per share held. The Company declares and pays dividend in Indian Rupees. In the event of liquidation of the company, the equity shareholders will be entitled to receive remaining assets of the company, after distribution of all preferential amounts. The distribution will be in proportion to the number of equity shares held by the shareholders.

Note

At the meeting held on 07-02-2017, the Board of Directors approved buy-back of shares upto a maximum size of Rs, 180 Crores at a price not exceeding Rs, 720/- per share and maximum of 25 Lac shares. The entire buy-back is completed through Open Market purchases on the Stock Exchanges. The Company had purchased 25 Lacs shares at an average rate of Rs, 673/- per share at a total cost of Rs, 168.12 Crores including brokerage and other charges and net of input tax credits. The Company had also completed the extinguishment formalities for the shares bought back and consequently the paid up shares of the company stands at 23,55,76,780 ofRs, 1/- each as at the reporting date.

Nature of Reserve

Capital Redemption Reserve was created for a sum equivalent to its face value at the time of Buy-back of Shares. The Company can use this reserve for issuing fully paid up Bonus shares.

Nature of Reserve

Debenture Redemption Reserve represents statutory reserve for Non-convertible Debentures issued. This is in accordance with Companies Act, 2013, where in a portion of profit are appropriated each year equivalent to 25% of the face value of debentures issued and outstanding as at the reporting date. This reserve has been released upon redemption of debentures.

Nature of Reserve

General Reserve represents the statutory reserve in accordance with Companies Act, 2013 wherein a portion of profit is apportioned to general reserve. Under Companies Act, 1956 it was mandatory to transfer amount before a company can declare dividend, however under Companies Act, 2013 transfer of any amount to General reserve is at the discretion of the Company.

Nature of Reserve

Retained Earnings represent the undistributed profits of the Company remaining after transfer to other Reserves.

Nature of Reserve

Fair Value through Other Comprehensive Income Reserve represents the balance in equity for items to be accounted in Other Comprehensive Income (OCI). The Company has opted to recognise the changes in the fair value of certain investments in equity instruments and remeasurement of defined benefit obligations in OCI. The Company transfers amounts from this reserve to Retained Earnings in case of actuarial loss / gain and in case of fair value recognition of equity instrument, the same will be transferred when the respective equity instruments are derecognized.

Note

The Board of Directors have recommended the payment of Final Dividend of Rs, 3/- per share for the year 2017-18 (FY 2016-17: Rs, 3/per share). This proposed dividend is subject to the approval of shareholders in the ensuing Annual General Meeting.

Notes

(a) Term Loans from Banks

(i) Pari passu first charge, by way of hypothecation, on Plant & machinery of the company, both present and future.

(ii) Term Loan from Banks carry an Effective Interest Rate of 7.15% p.a. repayable in the year 2019-20.

(b) Soft Loan from Government

(i) The Company has measured the loans availed at a concessional rate at fair value. The difference between fair value of the loan and the carrvina amount is classified as Deferred Grant.

(a) Deferred tax relating to origination and reversal of temporary differences include Rs, 8.55 Crores due to change in tax rate from 34.608% to 34.944%.

(b) Regular method of computation is applicable for Current tax for the year.

(c) Tax adjustments of earlier years represent amount provided for / written back based on recent assessment orders.

Notes

(a) Deferred Government Grants comprises of -

(i) Fair value of Interest benefit below market rate of Interest pertaining to Soft Loan from Government is recognized as Deferred Grant and recognized as Grant Income over the useful life of the underlying PPE.

(ii) Industrial Promotion Assistance (IPA) provided by Department of Industries, Government of Andhra Pradesh towards creation of infrastructure facilities is recognized as ‘Grant Income’ over the useful life of the underlying PPE.

(a) Borrowings are secured by way of first pari passu hypothecation charge on trade receivables and inventories of the company, present and future.

(b) Loans and advances from Director represents amount due to Chairman and Managing Director, which carries an interest rate of 6.75% p.a. (PY: 7.50% p.a.) amounting to Rs, 0.40 Crores (PY:Rs, 0.76 Crores).

(c) Other short term borrowings carry interest ranging from 6.18% to 8.90% p.a.

(d) Refer Note 54 for information about risk profile of borrowings under Financial Risk Management.

Notes

(a) There are no dues to Micro and Small Enterprises as at the reporting date (PY: Nil). This information as required to be disclosed under the Micro, Small and Medium Enterprises Development Act, 2006 has been determined to the extent of such parties that have been identified on the basis of information available with the company.

(b) Refer Note 54 for information about risk profile of Trade payables under Financial Risk Management.

The un-Amortized transaction cost adjusted against current maturities as at the reporting date is Nil (PY:Rs, 0.06 Crores). The details with regard to nature of security are furnished in Note 25.

(c) Unclaimed Dividends / Fixed deposits represent amount not due for transfer to Investor Education and Protection Fund.

(d) Disputed Dividend represents amounts claimed by the dividend warrant holders, which are subject matter of pending legal disputes.

(e) The Company has recognized financial guarantee obligation at fair value towards the corporate guarantees issued to the bankers on behalf of Related parties, and the same is recognized as other Income over the tenure of the corporate guarantee.

Notes

(a) The Company provides for expenses towards compensated absences provided to its employees. The expense is recognized at the present value of the amount payable determined based on an independent external actuarial valuation as at the Balance Sheet date, using Projected Unit Credit method.

Note

Provision for current tax is after netting of advance tax / TDS of Rs, 171.57 Crores (PY:Rs, 182.46 Crores)

(a) As per the Guidance Note on Division II, Ind AS Schedule III to the Companies Act, 2013 issued by ICAI, Revenue includes only the gross inflows of economic benefits received and receivable by the entity on its own account. Amounts collected such as sales taxes, goods and services taxes and value added taxes are not economic benefits which flow to the entity and do not result in increases in equity. Therefore, they have to be excluded from revenue. On the other hand, the recovery of excise duty is an inflow that the entity receives on its own account since the Company acts as a principal in collecting the excise duty and therefore the revenue has to be grossed up to include excise duty.

(d) Income recognized as Industrial Promotion Assistance represents amount receivable from Government of Andhra Pradesh under IDP 2015-20 Scheme.

(a) Interest Income include interest receivable for settlement of overdue outstandings by TANGEDCO for Rs, 2.92 Crores (PY:Rs, 15.58 Crores). Interest Income comprises of amount recognized as income from financial assets that are measured at Amortized Cost calculated using effective interest rate method.

(d) Sundry Receipts include Duty Drawback from Customs towards Exports of Rs, 0.29 Crores (PY: Rs, 0.32 Crores) and fair value recognition of financial guarantee contracts ofRs, 1.42 Crores (PY:Rs, 1.93 Crores).

(e) Income from merchant power is after netting off directly attributable expenses of Rs, 3.34 Crores (PY:Rs, 16.50 Crores).

(a) Interest on Term loans and Debentures represent interest calculated using the effective interest rate method.

(b) Exchange differences regarded as an adjustment to borrowing costs represent foreign exchange difference on foreign currency borrowings considered as an adjustment to borrowing costs in accordance with para 6(e) and 6A of Ind AS 23.

(c) The above Finance Costs is net of capitalized portion of Rs, 4.47 Crores (PY: Nil) attributable to the qualifying assets.

(d) Others include unwinding of discounts on provisions of Rs, 0.63 Crores (PY: Rs, 0.27 Crores)

(e) Refer Note 54 for information about Interest rate risk exposure under Financial Risk Management.

(a) Non cancelable long term operating lease obligations for future periods from the reporting date as a Lessee

(c) The Company is required to spend gross CSR expenditure ofRs, 12.56 Crores for the year (PY:Rs, 7.96 Crores) in accordance with Section 135 of the Companies Act, 2013 read with Companies (Corporate Social Responsibility Policy) Rules, 2014. As against this, the company has spent Rs, 10.93 Crores (PY: Rs, 7.28 Crores) in the following categories, in cash, for the purposes other than the construction / acquisition of asset:

47.2.1 Income tax assessments have been completed up to the accounting year ended 31-03-2014 i.e., Assessment Year 2014-15. The company has preferred appeals before appellate authorities in respect of various disallowances in assessments and the appeals are pending. As against the tax demand of Rs, 2.99 Crores (PY: Rs, 29.02 Crores), the department has adjusted Rs, 2.99 Crores (PY: Rs, 29.02 Crores) against refund due/tax credits. In the opinion of Management, there may not be any tax liability with regard to the said disallowances and the refunds so adjusted for Rs, 2.99 Crores are held in “Deposits under protest, in appeals” under other non-current assets.

47.2.2 The VAT authority in the State of Tamil Nadu has issued notices proposing to disallow input tax credit under Tamil Nadu VAT Act, 2006 for Rs, 68.32 Crores for the years 2011-12 to 2014-15. Challenging the said notices, the Company has filed writ petitions in the Madurai Bench of Madras High Court and these are pending.

In respect of other statutory appeals with the Appellate Authorities under State Sales Tax Acts I VAT Acts & CST Act in various states, as against net tax demands amounting to Rs, 10.51 Crores (PY: Rs, 11.47 Crores), a sum of Rs, 3.46 Crores (PY: Rs, 3.89 Crores) have been paid under protest. The amount paid under protest is held in “Deposits under protest, in appeals” under other non-current assets.

47.2.3 As against the levy of differential Excise Duty on cement in “Bulk & Cement supplies to industrial consumers” including penalty amounting to Rs, 262.68 Crores (PY: Rs, 252.42 Crores) demanded by the Department, denying the concession provided under relevant notifications, a sum of Rs, 262.45 Crores (PY: Rs, 252.42 Crores) remain unpaid as at 31-03-2018. The Tribunals have allowed company’s appeals in this matter. The Department’s appeal was also dismissed by Karnataka High court in a similar issue pertaining to another cement company. But the department has preferred an appeal before the Supreme Court against Tribunal orders in this matter. However periodical demands are being issued to the company by the department in this matter in view of pendency of its appeal in the Supreme Court. The Company has paid Rs, 0.23 Crores (PY: Nil) as pre-deposit in compliance of the interim orders by the appellate authorities and is held in “Deposits under protest, in appeals” under other non-current assets.

In respect of various disputed demands under adjudication as at 31-03-2018 for Rs, 308.72 Crores (PY: Rs, 315.34 Crores) due to disallowance of CENVAT credit on some of the inputs, capital goods, service tax on goods transports and levy of differential Excise Duty with consequential interest and penalty, a sum of Rs, 292.03 Crores (PY: Rs, 298.05 Crores) remain unpaid. The Company has paid so far Rs, 16.69 Crores (PY: Rs, 17.29 Crores) as pre-deposit in compliance of the interim orders by the appellate authorities. Out of Rs, 16.69 Crores, a sum of Rs, 6.70 Crores (PY: Rs, 3.63 Crores) were expensed and the balance amount of Rs, 9.99 Crores is held in “Deposits under protest, in appeals” under other non-current assets. Out of the disputed demands of Rs, 308.72 Crores, the Company had favourable orders from the lower authorities for Rs, 32.12 Crores (PY: Rs, 64.71 Crores) against which the Department has preferred appeals before appellate authorities.

47.2.4 TANGEDCO has raised a demand towards compensation charges of Rs, 0.92 Crores alleging that the Company has exceeded the quota of power consumption during evening peak hours. The Company has filed writ petition before the High Court of Madras and the same has been admitted. However, the Company had deposited the amount of Rs, 0.92 Crores under protest and the same is held in “Deposits under protest, in appeals” under other non-current assets.

47.2.5 Government of Karnataka has imposed Environmental Protection Fee of Rs, 5.80 crores, in connection with Company’s mining leases. In the writ petitions filed by the Company and other similarly affected companies, the High Court of Karnataka, has stayed the imposition of the fee. As per the interim order, the Company has deposited a sum of Rs, 2.90 Crores (PY: Rs, 2.90 Crores) and the same is held in “Deposits under protest, in appeals” under other non-current assets.

47.2.6 The Competition Commission of India (CCI), by its order dated 31-08-2016 has imposed a penalty of Rs, 258.63 Crores on the Company for alleged cartelization. The CCI order is pursuant to the directions issued by the Competition Appellate Tribunal (COMPAT) vide its order dated 11-12-2015 setting aside the original CCI order dated 20-06-2012 and remitting the matter to CCI for fresh adjudication of the issue. Upon appeal filed before the Competition Appellate Tribunal (COMPAT), the order of CCI has been stayed on condition that the company deposits 10% of the penalty amounting to Rs, 25.86 Crores. The same has been deposited by the company and the said deposit is classified under “Bank Balances other than Cash and Cash Equivalents”. By virtue of Section 185(4) of Finance Act, 2017, the appeals pending with COMPAT were transferred to National Company Law Appellate Tribunal by the Government. The arguments were completed. The Company believes that it has a good case and hence no provision is made.

47.2.7 The Writ Petitions filed by the company in the Madras High Court against Tamil Nadu Electricity Board (TNEB) towards levy of electricity tax at 15% on the generation of power from captive generator sets using furnace oil are pending. The levy pertains to the period 01-01-1992 to 30-10-1997. The total disputed amount of Rs, 1.34 Crores has been paid under protest and the same is held in “Deposits under protest, in appeals” under other non-current assets.

47.2.8 Southern Power Distribution Company of Andhra Pradesh Limited has demanded an amount of Rs, 0.32 Crores towards alleged excess load factor incentives allowed by them. The Company has filed an appeal before High Court of Andhra Pradesh and obtained an order of interim stay.

47.2.9 Andhra Pradesh Transmission Corporation Limited (APTRANSCO) has levied Rs, 5.91 Crores as Fuel Surcharge Adjustment (FSA) for the period from Apr 2008 to Dec 2012. Out of that, the company has paid and expensed Rs, 3.85 Crores and the balance amount of Rs, 2.06 Crores is not presently enforceable for the reasons that a part of the amount is covered in the appeal filed by the APTRANSCO before Supreme Court and the interim order granted in favour of the company by the AP High court. APERC has ordered that this FSA is not leviable from Jan 2013 onwards.

47.2.10 The Director of Geology & Mining, Government of Tamil Nadu had raised additional Royalty demand on limestone, based on production of cement by the company instead of basing it on actual quantity of limestone mined. The demand for the company is Rs, 9.66 Crores for the period from the year 1989 to year 2001. In the Writ petitions filed by the company and other similarly affected companies, the Madras High court has stayed the demands of the Government.

47.2.11 Water Resources Department of Public Works Department, Government of Tamil Nadu had raised a demand of Rs, 1.13 Crores contending that water charges are to be paid on the contracted quantity and not on the actual quantity of water drawn by the company from Arjuna River in Virudhunagar District. The demand pertains to the period from the year 1990 to year 2009. The company has obtained interim stay from the High Court of Madras. As per the interim order, the Company has deposited a sum of Rs, 0.30 Crores with the Department and the same is held in “Deposits under protest, in appeals” under other noncurrent assets.

47.2.12 Environment, Forests Science & Technology Department, Government of Andhra Pradesh has increased the Royalty on the Limestone mined from the Forest Area from Rs, 5/- per permit to Rs, 10/- per ton from the year 2010-11 onwards. The company filed a writ petition before the High Court of Andhra Pradesh and obtained an interim order, to pay 1/3rd of the demand. As per the Court order, the company has paid and expensed Rs, 1.57 Crores, being the 1/3rd portion up to 31-03-2017. The balance amount of Rs, 3.15 Crores being 2/3rd portion remain unpaid.

47.2.13 New Industries set up in Tamil Nadu were eligible for Power Tariff Concession as per G.O.Ms. No.29 dated 31-01-1995, which was sought to be withdrawn to Industries set up after 14-02-1997 as per G.O.Ms. No.17 dated 14-02-1997. The eligibility for Power Tariff Concession for Alathiyur unit became a dispute between the Company and TNEB. Based on the interim order of the High Court of Madras, the Company had availed power tariff concession to the tune of Rs, 11.41 Crores and sought refund of unavailed concession of Rs, 1.80 Crores. The matter was finally settled by the Supreme Court, vide its judgement dated 16-05-2008, wherein it laid down criteria for ascertaining the eligibility for Power Tariff Concession for new industries and directed the TNEB to decide the eligibility for the Company based on the said criteria. However, vide its order dated 30-06-2008, the

TNEB sought to introduce new criteria not enumerated in the Supreme Court judgement. Aggrieved, the Company filed a writ petition (WP No: 16348 of 2008) before the High Court of Madras, which by its judgement dated 13-11-2008 set aside the additional criteria not mentioned in the Supreme Court Judgement and confirmed the eligibility of Power Tariff Concession for the Company. TNEB has filed a writ appeal (WA No: 629 of 2010) in the High Court of Madras against the said order seeking disentitlement of power tariff concession already availed. The matter is pending before the High Court of Madras.

47.2.14 Under Tamil Nadu Electricity Regulatory Commission (Renewable Energy Purchase Obligations) Regulations, 2010, consumers owning grid connected captive power generating plants and open access consumers with a sanctioned demand of more than 2 MVA are obligated to consume a minimum of 9% and 0.5% of their energy requirements from wind and solar sources respectively. The non-complainants are required to purchase Renewable Energy Certificates (REC) from markets @ 1 REC per 1000 units of shortage or deposit an equivalent amount in a separate designated fund. Even though the Company is consuming wind energy generated from its wind farms, it has been excluded for reckoning the obligatory consumption, since the company has wheeling and banking arrangement with TNEB. Aggrieved, the Company including other affected producers have approached the Madras High Court and obtained an interim stay against the implementation of the said regulation.

47.2.15 TANGEDCO has levied “Scheduling & System Operation charges” for windmills under “Sale to Board” category at Rs, 600 per day per 2 MW based on their internal circular dated 25-11-2014. The annual impact of “Scheduling & System Operation charges” will be Rs, 1.02 Crores. The Company has filed a Writ Petition before the Madras High Court challenging the collection of said charges and obtained an interim stay against the “Scheduling & System Operation charges”.

47.2.16 The Company had purchased around 40.36 acres of lands in Tamil Nadu after verification of title documents based on revenue records of the year 1987 as basis. Thereafter, the revenue officials verified the title documents and transferred the patta in the name of the Company. While this being so, the Sub-Collector, Ariyalur, by the order dated 10-02-2015, cancelled the said patta and reclassified the said land as Government poromboke ‘Anadheenam lands’ by placing reliance on revenue records of the year 1927. The Company has filed a Writ Petition before the Madras High Court challenging the said cancellation of patta and obtained an interim stay.

47.2.17 TANGEDCO had raised a demand of Rs, 4.28 Crores towards alleged incorrect adjustments of wind energy based on its Audit objections. Against the above demand, a sum of Rs, 2.54 crores was appropriated by TANGEDCO from the Company’s Deposits with them and balance amount of Rs, 1.74 crores remain unpaid. The amount appropriated is held in “Deposits under protest, in appeals” under other non-current assets. The Company has challenged the said demand before the TNERC by filing a Petition on 30-05-2014 and the same is pending before the Commission.

47.2.18 The Department of Mines and Geology, Government of Karnataka by its order dated 31-10-2014 withdraw its mining lease granted to the company already granted for 30 hectares of forest land on a technical ground. Based on the writ petition filed by the company, the Honourable Karnataka High court has directed the State Government to consider the company’s representation. The Government vide its order dated 10-01-2016 has rejected the company’s representation. Aggrieved by the said order, the Company has again filed a writ petition before the Honourable Karnataka High Court and the same is pending.

47.2.19 The Special Deputy Collector (Stamps), Ariyalur had issued a notice demanding an amount of Rs, 0.65 Crores for alleged deficiency in stamp duty in purchase of lands. Against the demand, the Company filed an appeal before Honourable High Court of Madras and it is pending.

47.2.20 As per the Grid Connectivity and Intra State Open Access Regulations, the TNERC has authorized TANGEDCO to collect Parallel Operation Charges of Rs, 30,000/- per MW from the power generators whoever availing only parallel operation with grid but without availing open access. Even though the Company had open access approval, TANGEDCO had sent demand notice for parallel operation charges for a sum of Rs, 9.17 Crores levied retrospectively from 07-05-2014 to 31-12-2016. The Company has filed writ petition in the Honourable High Court of Madras and obtained the final order directing the TANGEDCO to settle the matter in TNERC within a reasonable period.

Defined Benefit Plan - Gratuity

The Gratuity payable to employees is based on the employee’s service and last drawn salary at the time of leaving the services of the Company and is in accordance with the rules of the Company read with Payment of Gratuity Act 1972. This is a defined benefit plan in nature. The Company makes annual contributions to “The Ramco Cements Limited Employees’ Gratuity Fund” administered by trustees and managed by LIC of India, based on the Actuarial Valuation by an independent external actuary as at the Balance Sheet date using Projected Unit Credit method. The Company has the exposure of actuarial risk such as adverse salary growth, change in demographic experience, inadequate return on underlying plan assets. This may result in an increase in cost of providing these benefits to employees in future. Since the benefits are lump sum in nature, the plan is not subject to any longevity risks.

(e) Companies over which KMP/Relatives of KMP exercise significant influence

Rajapalayam Textile Limited Thanjavur Spinning Mill Limited

Sandhya Spinning Mill Limited The Ramaraju Surgical Cotton Mills Limited

Sri Harini Textiles Limited Shri Harini Media Limited

JKR Enterprise Limited Ontime Industrial Services Limited

Ramco Management Private Limited Sudharsanam Investments Limited

(f) Employee Benefit Funds where control exists

The Ramco Cements Limited Officers’ Superannuation Fund The Ramco Cements Limited Employees’ Gratuity Fund

(g) Other entities over which there is a significant influence

Smt. Lingammal Ramaraju Shastra Prathishta Trust Gowrishankar Screws

PACR Sethuramammal Charity Trust PACR Sethuramammal Charities

Ramco Welfare Trust PAC Ramasamy Raja Education Charity Trust

Raja Charity Trust Rajapalayam Rotary Trust

Shri Abhinava Vidya Theertha Seva Trust Nachiar Charity Trust

Gowrihouse Metal Works PAC Ramasamy Raja Centenary Trust

R. Sudarsanam & Co. The Ramco Cements Limited Educational and

Charitable Trust

3. Disclosure in respect of Related Party Transactions (excluding Reimbursements) during the year and outstanding balances including commitments as at the reporting date:

Fair value hierarchy

The Company uses the following hierarchy for determining and disclosing the fair value of financial instruments by valuation technique:

Level 1 : Quoted (Unadjusted) prices in active markets for identical assets or liabilities

Level 2 : Other techniques for which all inputs which have a significant effect on the recorded fair value are observable, either directly or indirectly.

Level 3 : Techniques which use inputs that have a significant effect on the recorded fair value that are not based on observable market data.

4. Financial Risk Management

The Board of Directors (BOD) has overall responsibility for the establishment and oversight of the Company’s risk management framework and thus established a risk management policy to identify and analyse the risk faced by the Company. Risk Management systems are reviewed by the BOD periodically to reflect changes in market conditions and the Company’s activities. The Company through its training and management standards and procedures develop a disciplined and constructive control environment in which all employees understand their roles and obligations. The Audit Committee oversees how management monitors compliance with the Company’s risk management policies and procedures, and reviews the risk management framework. The Audit committee is assisted in the oversight role by Internal Audit. Internal Audit undertakes reviews of the risk management controls and procedures, the results of which are reported to the Audit Committee.

The Board of Directors regularly reviews these risks and approves the risk management policies, which covers the management of these risks:

Credit Risk

Credit Risk is the risk of financial loss to the Company if the customer or counterparty to the financial instruments fails to meet its contractual obligations and arises principally from the Company’s receivables, treasury operations and other operations that are in the nature of lease.

Receivables

The Company’s exposure to credit risk is influenced mainly by the individual characteristic of each customer. The Company extends credit to its customers in the normal course of business by considering the factors such as financial reliability of customers. The Company evaluates the concentration of the risk with respect to trade receivables as low, as its customers are located in several jurisdictions and operate in largely independent markets. The Company maintains adequate security deposits from its customers in case of wholesale and retail segment. In case of institutional segment, credit risks are mitigated by way of enforceable securities. The exposures with the Government are generally unsecured but they are considered as good. However, unsecured credits are extended based on creditworthiness of the customers on case to case basis.

Financial Instruments and Cash deposits

Investments of surplus funds are made only with the approved counterparties. The Company is presently exposed to counter party risk relating to short term and medium term deposits placed with banks, and also investments made in mutual funds. The Company places its cash equivalents based on the creditworthiness of the financial institutions.

Liquidity Risk

Liquidity Risks are those risk that the Company will not be able to settle or meet its obligations on time or at reasonable price. In the management of liquidity risk, the Company monitors and maintains a level of cash and cash equivalents deemed adequate by the management to finance the company’s operations and to mitigate the effects of fluctuations in cash flows.

Fund Management

Due to the dynamic nature of the underlying business, the Company aims at maintaining flexibility in funding by keeping both committed and uncommitted credit lines available. The Company has laid well defined policies and procedures facilitated by robust information system for timely and qualitative decision making by the management including its day to day operations.

Foreign Currency Risk

The Company’s exposure in USD and other foreign currency denominated transactions in connection with import of capital goods, spares and fuel, besides exports of finished goods and borrowings in foreign currency, gives rise to exchange rate fluctuation risk. The Company has following policies to mitigate this risk:

Decisions regarding borrowing in Foreign Currency and hedging thereof, (both interest and exchange rate risk) and the quantum of coverage is driven by the necessity to keep the cost comparable. Foreign Currency loans, imports and exports transactions are hedged by way of forward contract after taking into consideration the anticipated Foreign exchange inflows/ outflows, timing of cash flows, tenure of the forward contract and prevailing Foreign exchange market conditions.

Cash flow and fair value interest rate risk

Interest rate risk arises from long term borrowings with variable rates which exposed the company to cash flow interest rate risk. The Company’s fixed rate borrowing are carried at amortized cost and therefore are not subject to interest rate risk as defined in Ind AS 107 since neither the carrying amount nor the future cash flows will fluctuate because of the change in market interest rates. The Company is exposed to the evolution of interest rates and credit markets for its future refinancing, which may result in a lower or higher cost of financing, which is mainly addressed through the management of the fixed/floating ratio of financial liabilities. The Company constantly monitors credit markets to strategize a well-balanced maturity profile in order to reduce both the risk of refinancing and large fluctuations of its financing cost. The Company believes that it can source funds for both short term and long term at a competitive rate considering its strong fundamentals on its financial position.

5. Capital Management

For the purpose of the Company’s capital management, capital includes issued equity share capital and all other equity reserves attributable to the equity holders of the Company. The primary objective of the Company’s capital management is to maximize the shareholders’ wealth.

The Company manages its capital structure and makes adjustments in the light of changes in economic conditions and the requirements of the financial covenants. The Company monitors capital using a gearing ratio, which is net debt divided by total equity plus net debt.

In order to achieve this overall objective, the Company’s capital management, amongst other things, aims to ensure that it meets financial covenants attached to the interest-bearing loans and borrowings that define capital structure requirements. There have been no breaches in the financial covenants of any interest-bearing loans/borrowing. There are no significant changes in the objectives, policies or processes for managing capital during the years ended 31-03-2018 and 31-03-2017.

Source : Dion Global Solutions Limited
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